Canada’s new TV rules could erode jobs, funding, report warns

The findings of a new study suggest the pain felt by an industry already under pressure from online video will be exacerbated by new rules, chasing hundreds of millions of dollars in annual revenue out of the TV ecosystem.

Major changes to the television industry are set to roll out later this year, but a new study warns that rules designed to unbundle large cable and satellite packages could cause nearly 7,000 job losses and take away about $400-million in funding for Canadian programs.

The 100-page report by consulting firm Nordicity and broadcasting consultant Peter Miller was commissioned by unions and advocacy groups representing creators and producers in the TV sector. It responds to new regulations born out of Let's Talk TV, a hearing held by the federal regulator in the fall of 2014 that resulted in a promise that viewers would soon be able to pay only for the channels they want.

The findings suggest the pain felt by an industry already under pressure from online video will be exacerbated by the new rules, chasing hundreds of millions of dollars in annual revenue out of the TV ecosystem. And while much of the hardship would be felt by the largest TV distributors and broadcasters, the effects would trickle down, reducing investment in Canadian shows and threatening the survival of some Canadian channels, the groups argue.

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In promising to introduce pick-and-pay TV options by the end of 2016, the chairman of the Canadian Radio-television and Telecommunications Commission (CRTC), Jean-Pierre Blais, acknowledged that some channels would likely die and some industry players could suffer, but said the rules are "forcing the industry to finally face that the world is changing."

Yet the new report warns of a stark five-year outlook for Canada's creators.

"Implementing the CRTC's policy proposals could mean thousands of hours of Canadian stories will never be produced," said Stephen Waddell, national executive director of the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA), one of the groups that commissioned the report.

The other commissioning groups are the Canadian Media Guild, the Directors Guild of Canada, Friends of Canadian Broadcasting, and the union Unifor. (Through Local 87-M, Unifor represents some staff at The Globe and Mail).

During the 2014 hearing, some of these organizations argued strenuously against proposed changes that could lead to financial losses across the industry, as a large slice of the funding that supports Canadian programming is set as a percentage of distributors' total revenue.

The new report attempts to separate the impact of the Let's Talk TV decisions from the broader forces already reshaping television. It says the regulatory changes alone could cost the TV sector 6,830 full-time-equivalent jobs by 2020, though some of those cuts have already happened. Bell Media has slashed more than 400 jobs since August, and the chief executive officer of its parent company BCE Inc., George Cope, told analysts the restructuring was "really the result of the CRTC rules."

Spending on Canadian programming could fall by $399-million in 2020, according to the study, by which point annual revenue to Canadian specialty TV channels could drop by $970-million, and by $858-million for TV distributors. It further cautions that "spinoff" effects on related sectors of the economy could claim another 8,300 jobs and put a $1.4-billion dent in Canada's gross domestic product.

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The conclusions are based in part on assumptions of modest but steady cord-cutting – the term used to describe viewers cancelling cable or satellite TV subscriptions – with total households subscribing to TV falling from 11.8 million in 2014 to 11.3 million in 2020, or a loss of 1.5 per cent of subscribers each year.

In recent surveys, Charlton Strategic Research Inc. found that 7 per cent of TV subscribers say they plan to cut the cord, though far fewer actually do. Data from Boon Dog Professional Services Inc. shows large TV providers lost 153,000 subscribers in the first three quarters of 2015, or about 1 per cent of their collective base.

Last year, in anticipation of Let's Talk TV, some of the industry's largest companies such as Rogers Communications Inc. and Shaw Communications Inc. commissioned reports that tried to estimate the potential impact of various policy changes, with varying conclusions.

The new Nordicity report relies partly on those and other studies, but also makes several assumptions – that viewers who pick their own channels will spend an average of $20 above the $25 basic package each month, for example, and that consumers will trim or ditch their TV subscriptions 25 per cent faster owing to the new rules – which are not directly supported by hard data or prior research.

The study's authors say it is intended to show "the most plausible outlooks" for the coming changes, and to offer an alternative scenario it suggests would cushion the financial blow with "relatively minor 'tweaking.'" Their proposal would give distributors a choice to unbundle channels, but not require them to, while restoring some prior regulations, including one that requires viewers to receive "a preponderance of" Canadian channels, sticking closer to the status quo.

With some new rules already in place, skinnier basic packages set to be available in March, and a full pick-and-pay system mandated by December, however, there is no sign the CRTC is inclined to change course.

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Kaan Yigit, president of Solutions Research Group Consultants Inc., said it is clear "the Commission won't turn the clock back on this." Rather, the report's attempt "at quantifying the potential impact is probably about setting the table and bargaining positions for future hearings, and to get the ear of the Liberal government."

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